The Republic of Turkey proposed to demolish and expand its Washington, D.C., chancery building located in two overlapping historic districts. Turkey submitted an application to the Department of State requesting permission to demolish the existing structure and build a larger one. In accordance with the Foreign Missions Act, the application went first to the State Department's Director of the Office of Foreign Missions. The Director had 60 days to veto or limit the proposal; no veto was issued. The proposal was next reviewed by the District of Columbia Foreign Missions Board of Zoning Adjustment, which rejected the proposal because of the excessive size of the new structure. Turkey resubmitted a down-sized plan for the new chancery. Once again, the Director of Foreign Missions declined to exercise his veto power and forwarded the matter to the Board of Zoning Adjustment. This time, the Board granted permission to proceed with chancery expansion plans. The National Trust for Historic Preservation and two citizens' groups challenged the Board of Zoning Adjustment's approval.

Plaintiffs alleged that the State Department and the Board of Zoning Adjustment failed to comply with the National Historic Preservation Act (NHPA), the National Environmental Policy Act (NEPA), and the Foreign Missions Act. Plaintiffs also alleged that the board was without jurisdiction to consider chancery requests involving demolition and expansion. Defendants filed a motion to dismiss the case on the grounds that the Foreign Missions Act preempted NHPA and NEPA. Even if NHPA and NEPA were not preempted, according to defendants, they were inapplicable to the present case.

As a preliminary matter, the court found it had jurisdiction to review the Director of Foreign Missions' decision to not exercise his veto power because the court was not persuaded that Congress intended to insulate decisions made under the Foreign Missions Act from judicial review.

With respect to the NEPA claim, the court concurred with the D.C. Circuit's finding in District of Columbia v. Schramm, 631 F.2d 854, 862 (D.C. Cir. 1980), that the Federal agency's decision not to exercise its veto power could not be "classified as 'Federal action,' much less a 'major Federal action'" under NEPA. 834 F. Supp. at 448. According to the district court, the "failure to veto complained of is not the functional equivalent of issuing a permit." Id. at 449.

In addressing the NHPA claim, the court applied similar reasoning. In light of the new definition of "undertaking" in the 1992 amendments to the NHPA, the court observed that the obligation to consult with the Advisory Council is triggered in several situations: (1) when an agency has the authority to issue a license; (2) when an action is carried out on behalf of a Federal agency; (3) when an action is administered by a State or local entity pursuant to a delegation or approval by a Federal agency; and (4) when an agency approves funds for a Federal or federally assisted project. Id. at 449-50. The court framed the question of NHPA applicability as turning on whether the Director's decision not to veto the project constituted a licensing or, alternatively, whether the Board of Zoning Adjustment's decision was pursuant to a delegation by the State Department. Id. at 450.

In addressing the question of whether a failure to veto a project constituted an undertaking, the court applied a technical interpretation of the term "license" and determined that the State Department's action was not tantamount to a license. The State Department did not give written permission to Turkey nor was its permission a prerequisite to the Board's consideration of the application. The court's narrow interpretation of a "license" is contrary to the District of Columbia district court precedent of McMillan Park Community v. National Capital Planning Commission, 759 F. Supp. 908 (D.D.C. 1991), rev'd on other grounds, 968 F.2d 1283 (D.C. Cir. 1992). Id.

The court also addressed plaintiffs' argument that the Board of Zoning Adjustment's permitting decision was pursuant to a delegation by the State Department and, thus, within the definition of an undertaking under the 1992 amendments to NHPA. The district court described the 1992 amendments as a codification of the decision in Indiana Coal Council, Inc. v. Lujan, 774 F. Supp. 1385 (D.D.C. 1991). However, the court distinguished the present case from Indiana Coal Council, observing that, unlike Indiana Coal Council, the State Department did not maintain an oversight role and the zoning permit decisions were the sole responsibility of the Board of Zoning Adjustment. Moreover, the court reasoned that the Foreign Missions Act placed the authority to issue permits regarding location or expansion of chanceries directly in the Board's hands.

Plaintiffs also alleged a violation of Executive Order 11593, which requires Federal agencies to assure that Federal plans contribute to the preservation of non-federally owned sites. When properties listed in the National Register of Historic Places will be substantially altered or demolished due to Federal action, Federal agencies must ensure that those properties are recorded and that the records are deposited in the Library of Congress. The court rejected this argument because it declined to find an implied cause of action under the Executive Order, although it acknowledged some courts had. Id. at 451.

The court addressed plaintiffs' argument that defendants violated the Foreign Missions Act. The court rejected plaintiffs' argument that the Board of Zoning Adjustment lacked jurisdiction to consider an application to demolish the chancery. The legislative history, the language of the Foreign Missions Act in its entirety and the plain language of Section 4306 supported the finding that the Board had jurisdiction over the demolition of properties.

The court found in favor of plaintiffs on the question of whether in granting Turkey's permit application, the Board of Zoning Adjustment failed to comply with the requirements of the Foreign Missions Act. According to Section 4306(d), the Board must consider historic preservation and "substantially comply" with "District of Columbia and Federal regulations governing historic preservation." 22 U.S.C. § 4306(d). The court found that demolition of the chancery would alter the character of the historic districts where it was situated and, thus, substantial compliance with NHPA and the D.C. Historic Landmark and Historic District Protection Act was required.

The court directed defendants to refer the matter to the Advisory Council on Historic Preservation and the District of Columbia Historic Review Board for expedited review. Although the court granted summary judgment for plaintiffs on the basis that defendants failed to comply substantially with NHPA, the court ordered a trial on the question of substantial compliance with local historic preservation laws as the Foreign Missions Act required.

In a later proceeding, the court addressed the issue of compliance with local preservation laws, explaining that "substantial compliance" necessitates compliance with the spirit of the law, not strict compliance. 834 F. Supp. at 455. The court interpreted the local preservation law as requiring solicitation of the views of the mayor's agent, but found that the Board of Zoning Adjustment, not the mayor's agent, had authority to make the ultimate permitting decision. Id. The district court held that the Board of Zoning Adjustment had substantially complied with local preservation laws. However, the court held that the Board of Zoning Adjustment had failed to substantially comply with NHPA, as required by the Foreign Missions Act.

Plaintiffs appealed the district court decision on the undertaking issue, and defendants cross-appealed on the issue of compliance with the Foreign Missions Act. The D.C. Circuit Court of Appeals affirmed the district court's holding. The court found that although the State Department's failure to disapprove Turkey's proposal was a prerequisite to initiation of the project, it was not in itself an undertaking as defined by NHPA. 49 F.3d at 754.

The court then examined whether the project in itself was an undertaking. In so doing, the court interpreted the 1992 amendments as expanding the definition of undertaking to include those projects requiring Federal approval or permits, as well as those that are federally funded or licensed.

The court did note that "upon a first reading, the amended definition seems actually to confine the notion of an 'undertaking' to a project (etc.) 'funded in whole or in part under the direct or indirect jurisdiction of a federal agency,' and thus by omission to exclude a federally licensed project from the coverage by the statute. That reading of the definition, however, would deprive the references to licensing in §106 of any practical effect." Id at 755.

Without deciding the issue of whether the project itself constituted an undertaking, the court opined that Section 106 did not apply because the Secretary of State had no authority to license the project. Id. Contrary to the Council's interpretation of the statute, the court reasoned that once a project fell within the definition of an undertaking, the agency must determine whether the project is federally funded or federally licensed. Id. Because no funding was involved, the court focused its discussion on whether the State Department licensed the project by failing to disapprove it. The court of appeals observed that circuit courts were "cautious in extending the reach of §106 beyond the grasp of its terms" and cited several cases where courts declined to find an undertaking. Id. at 756. Under the facts of this case, where the State Department's actions were highly discretionary and the Foreign Missions Act was intended to ensure expeditious process, the court noted it was particularly inappropriate to broadly interpret the language of Section 106. Id. at 756-57. The appellate court thus affirmed the district court's holding that the "inaction" of the State Department was not subject to Section 106 review.

Plaintiffs also appealed the district court's determination that the Board of Zoning Adjustment had jurisdiction over the proposal, but the court of appeals upheld the district court decision and concluded that the Foreign Missions Act gave the Board exclusive jurisdiction over the location, replacement, or expansion of a chancery.

Finally, the appellate court addressed the matter of the Board's adherence to the Foreign Missions Act provisions requiring substantial compliance with local and Federal historic preservation regulations.

The court of appeals affirmed the district court, holding that the Board of Zoning Adjustment had substantially complied with local preservation law by submitting the proposal to the historic preservation review board and the mayor's agent, even though the board approved the proposal without the comments of the mayor's agent.

With regard to substantial compliance with Federal historic preservation law, the court of appeals reversed the district court's finding that the Board should have referred the proposal to the Council for review and comment. Specifically, the court determined that the Board of Zoning Adjustment substantially complied by considering the comments of the local historic preservation review board. The court found it inappropriate to apply the Section 106 process to a case referred by a local board rather than a Federal agency. See id. at 760.